After no less than nine straight trading days of losses, Cable, or the pound sterling against the US dollar, rebounded yesterday, in robust fashion. There was no economic news on either side of the Atlantic (the
markets were on holiday for Labor Day), but the rise started about an hour
after the open of the
trading session. Towards lunchtime London
time, the pound had gained by a full US cent, from $1.518 to $1.528 in value. London
The fall that was corrected yesterday had its origins in trading on the 25th of August, the same day that the Chinese monetary authorities made another cut to their core interest rates, in an attempt to contain the turmoil around the virtual collapse of their equity markets. The FTSE rallied on that day and the pound started to lose value.
Cable is also up in the Asian session this morning (Tuesday) despite a negative reading for British Shop Price Index for August (-1.0%). Though negative, this reading is still an improvement on the previous month, which came in at -1.4%.
No catalyst other than a technical support level
The only apparent catalyst for yesterday’s rise is the existence of the support level that had been established in GBPUSD at the very end of May and the first day of June.
The Bank of England will have its monetary policy statement this week, on Wednesday. There is no expectation of a rate rise announcement on this occasion, but there may be commentary in the statement itself that will give some clue as to the possible timing of a Bank of England tightening regime.
Some market participants would appear to think so.